Interview with Murasoli Maran

INTERVIEW WITH MURASOLI MARAN
"You must compete, compete, compete"

A week after throwing the Indian floodgates open to imports, Commerce and Industry Minister Murasoli Maran is busy reading The Ownership Solution: Towards a Shared Capitalism For The 21st Century by Jeff Gates. It's a curious choice for an ardent reformer as the author talks about how modern day capitalism has led to inequities of wealth and suggests ways to correct this. But then Maran has always tempered his advocacy of reforms with appeals to avoid hard decisions. This year's Export-Import (ExIm) Policy also attempts a balancing act, removing import curbs and telling industry to compete globally, while providing it some protection. In this interview with BT's Seetha, Maran puts industry on watch and insists India will not be cowed down by the World Trade Organization (WTO). Excerpts:

Q. The ExIm Policy has removed all restrictions on imports. But along with that, imports of some items have been canalised; the budget hiked tariffs and a 'war room' has been set up to monitor imports. The impression is that the government is trying to shield industry from competition.

A. Canalisation is against WTO rules. However, Article 17 of GATT allows state trading enterprises, provided they are consistent with the general principles of non-discriminatory treatment and they are run on commercial principles. The finance minister said in his budget speech that tariffs would be brought down to asean levels within three years. So these three years are a transition period.

However, we cannot allow India to be flooded with goods through unfair means. If that happens, we have to take preventive steps. To do that, absolute vigilance is very essential. Somebody should perform the role of a watchdog. The so-called 'war room' will do this.

Besides, we should also know whether or not there is an import surge. We cannot go by second-hand reports from XYZ. There may be disinformation by interested lobbies. For example, one month ago, there were reports that frozen chicken legs are just waiting in Dubai to be dumped in India. But so far nothing has happened. We should know the truth.

We are number two in the world in filing anti-dumping cases...

Now we are number one (laughs uproariously).

How do you balance interests of user industries and producer industries?

Look, if imports come legally at normal value we can't call it dumping. We can't use the anti-dumping weapon unnecessarily. We dropped the case against Chinese toys, because there wasn't enough evidence.

So you will not protect inefficient industry at any cost? And the protection is only temporary?

Yes. Competitiveness is the only answer. Because the world is cruel, not compassionate. The removal of quantitative restrictions (GRs) will spur domestic industry to be more competitive. You cannot take consumers or the so-called protection for granted. You have to compete, compete, compete.

When you became minister, you had said that the combined commerce and industry portfolios would help you prepare industry to cope with WTO. Industry doesn't seem prepared.

One cannot prepare industry through external help. They should rise to the occasion. Actually, I have a lot of faith in Indian industry. So far there is no cry that they were let down. And whenever necessary, we have jumped into action like insisting that imports conform to Bureau of Indian Standards specifications and carry the retail price. These are all WTO compatible measures. We are giving national treatment to all. There is logic in giving protection to infant industry. But the infant should grow up also.

Industry is at a disadvantage vis-a-vis external competition. The operating environment is not very friendly.

Our exports are facing a lot of problems, transaction costs are high. A 1998 World Bank survey shows that the competitive cost disadvantage per container is $80. ASSOCHAM calculated that the burden of indirect duties and state taxes add to the cost disadvantage of Indian exports to the tune of 17 per cent. Another pitiable fact is that less than 7 per cent of our exports are shipped to ultimate destinations from Indian ports. A large chunk is sent to Singapore, Colombo, or Dubai where mother ships berth. Sixty per cent of Colombo Port's traffic comes from India. Our ports are not yet ready to take big containers and mother ships. Not only that, the turnaround time is six to seven days. In Singapore and Hong Kong, it is six to seven hours. These are the problems being faced by our exporters. And ultimately, competitiveness is very important.

Competitiveness is affected by labour laws, high cost of capital, etc. As industry minister how have you tried to address these problems?

We should not forget that domestic industry has grown to this level in spite of labour laws and all these difficulties. Now they have to improve their competitiveness by adopting latest technology, for example.

You want to increase India's share in world trade to 1 per cent. Can you achieve that, given the slowdown in the world economy?

Sometimes these kind of problems can be converted into opportunities. It all depends on the situation.

Our exports are still concentrated on the US and European markets. Shouldn't we focus on newer markets?

Certainly. Latin America is still a dark continent to us. But because of our Focus Latin America programme, we have increased our exports by 40 per cent. However, in quantum terms it is still very low. We also have a very good market in the African countries.

Can we get around the slowdown by focussing on these markets?

It is quite possible. We will have to study it carefully.

What is the medium term export policy that you are working on?

It will be for five years from 2001-2006. It has identified the export baskets of our trading partners. Certain new approaches are being adopted like our market access initiative, agro-export zones and we have to replace existing incentive schemes with new schemes wherever necessary. Also, state governments are given a key role and we have to redefine the role of commercial attaches in our missions abroad and help the existing export promotion councils to adapt themselves to the changing global trade environment.

You are emphasising agricultural exports a great deal. But the problems dogging agricultural exports is not something the commerce ministry can address-restrictions on exports and on movement of foodgrains. Poor infrastructure is leading to huge wastage of products.

Our agricultural exports are based on supply side factors. Whenever there is a surplus, we are willing to export. Look what happened in the case of onions. When there is a glut we export, when there is a shortage, we ban exports. That will not help because the importer wants a reliable supply. Therefore, the cabinet has set up a group of ministers to go into the problem. And the finance minister has announced several schemes for subsidising cold chains. And we are supplementing these efforts. Our Alphonso mangoes are the sweetest in the world. But because of a fruit fly and worms in the seed, they attract sanitary and phyto-sanitary conditions. Vapour treatment is needed to tackle this. For this, common facilities are needed which we will be funding.

You are relying greatly on the special economic zones (SEZs) to boost exports. But considering we cannot replicate the Chinese model, how can we hope to pull investments from other countries?

Our aim is not to pull away. If we create the correct environment, investments will come automatically. Already we have given tax concessions and we have asked for more.

You want to make the whole country one big SEZ. Can you do it and what is the time frame you have in mind?

Oh, it will take a very long time. This is just a humble beginning. And these are all medium-term strategies. It will take a very long time for the country to become an SEZ. First let us start these. Already there is competition among states. West Bengal, Uttar Pradesh, and Maharashtra want one, Orissa wants two. This is a new hope for our exports.

During your tenure, foreign direct investment has been liberalised a great deal-almost everything is on the automatic route, approvals are extremely fast. Yet, inflows are a problem.

Mega projects take lot of time. Then there are sectoral caps. We are under the wrong impression that foreign investors are knocking at our doors. It is not so. If India is closed, they will go to Vietnam or China. We should have a suitable environment.

Why haven't you been able to convince your cabinet colleagues to drop their resistance to removing ceilings?

I wouldn't call it resistance. They may have their own reasons. We can't simply open everything. My ministry tries to persuade other ministries. At the same time, we never do anything without the consent of the administrative ministries.

But it takes inordinate time for proposals to materialise on the ground. And this happens even in the case of smaller projects.

That is true. The approval-whether through automatic route or the FIPB route-opens one door. Then investors have to go to the destination, to the state governments, which is where the problem arises. The Foreign Investment Implementation Authority (FIIA) tries to sort matters out. Recently, we had a meeting with French and German investors and we have resolved most of the issues. But now there is a race among states for FDI. Many chief ministers have become globe trotters wooing FDI. Very soon this will change the climate.

You had set a goal of $ 10 billion worth of inflows. When will that be achieved?

We have already achieved 50 per cent of this. If we remove all these bottlenecks, we may be able to achieve this in two to three years.

Industry is going through a slowdown. How are you trying to address the problems.

Our ministry is doing a facilitating role only. We are not the old industry ministry, a licensing authority, we can't pump in money.

The old Industrial Development and Regulation Act was to be replaced by an Industrial Development Act. What is the status of that?

We are working on it. We will introduce it, if not in this session, the next session.

Why is the government against a new round in the WTO?

We want to know why should there be a round. They should convince us why it is needed. Also, we cannot sign a blank cheque. What is the agenda? These things should be clarified. And what happened to the implementation issues? India collected all the details and submitted it to the WTO. Still we could not move forward in that direction.

But these issues and anomalies in the Uruguay Agreement can be taken up in the new round.

Then why call it a new round? The round has become a fanciful word. And what is the guarantee that they will take it up? What is preventing them from taking it up now? There is no movement. The developing countries should not bear new obligations. New round means new subjects, new rules. We are against non-trade issues being taken up like core labour standards, environment.

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